Gold, Redeemability, Bitcoin, and Backwardation

Monetary Metals's picture

I recently released a video about the Internet-based currency, Bitcoin. I asked the question: is Bitcoin money?  In brief, I said no it’s an irredeemable currency.  This generated some controversy in the Bitcoin community.  I took it for granted that everyone would agree that money had to be a tangible good, but it turns out that requirement is not obvious.  This prompted me to write further about these concepts.

A human being has a physical body with physical needs, and lives in a physical world.  He produces that he may eat and clothe and shelter himself.  Once civilization develops beyond subsistence, men specialize to increase their production.  Each relies on others, who specialize in other fields.  Each trades his products for the goods produced by others.

A problem arises, called the coincidence of wants.  One man produces food and another produces leather moccasins.  When the moccasin producer is hungry, the food grower may not need new shoes.  Mr. Moccasin must discover that some goods are more marketable than others.  He can trade less-marketable moccasins for more-marketable salt, for example.  He may not need the salt (though he can always use it) but he knows it is accepted in trade for food and other goods.

Eventually, a market process finds the most marketable good.  It becomes even more marketable due to its increasing use as money (but it does not lose the attributes that made it useful in the first place).

People accept the monetary good in trade because it fills one of three needs.  They will exchange it for something else later.  They may want it for its own sake.  Or they may accumulate a hoard during their working years so that in retirement, they can dishoard to pay their bills.

Modern civilization layers a complex financial system on top of the monetary good.  It has bills, bonds, and savings accounts, etc.  Most people do not want to redeem most paper credit instruments, for reasons of convenience and the preference for an income.  However, it is important to keep in mind that the possibility of redemption is necessary and essential to a working financial system.  Everyone must choose for himself the right balance between holding the monetary commodity directly and various earning assets that promise to be redeemed in a quantity of the monetary commodity in the future.

Only this balancing process can perform one particular and critical function.  Hoarding, also known as managing risk, has played a vitally important role throughout human history (and which is almost unappreciated by the economics field).  Hoarding and investing are balanced by risk tolerance.  In a free market without central banking and bailouts, everyone must think of risk.

To the economist, redemption of paper and hoarding of the monetary good, serve to police and clean the system, force the write-offs of bad credit (as opposed to letting them accumulate), and of course empower the saver to enforce his interest-rate preference.  This last, is a point that I have not seen anyone make prior to Professor Antal Fekete, and which is under-appreciated today.1

To the hoarder himself, hoarding looks and feels very different.  He is thinking of having something tangible in hand.  A coin in his pocket does not have a risk, it can be carried anywhere, and can be accumulated in a safe place.  To anyone aware that he is living in the physical world, there is no substitute to having a physical, tangible commodity.

Today, of course, legal tender laws obscure most of the above.  The monetary commodity is not allowed to do its job, and we’re lucky that after they removed it from the monetary system they at least once again legalized its ownership for American citizens.  Even so, most people regard owning gold as a risky speculation because its dollar price is volatile.  It’s madness.

Returning to the question of Bitcoin, we have a conundrum.  Bitcoin is not debt.  In that sense, it is like gold—there is nothing to redeem because the thing is the final good.  Unlike gold, it is not a tangible good.  You cannot hold it or stack it in a safe in the floor.  Other than the value you hope it has in trade, it has no utility by itself.

Bitcoin in this context is like an attempt to reverse cause and effect.  Gold is money because people strongly desired it for its physical properties and then, subsequently, discovered that it was the most marketable good and thus useful as money.  Bitcoin bypasses this and attempts to go straight to being money.  Should hackers break its cryptography, the Internet go down for a few months, or any number of other scenarios occur, the above logic will reassert itself.

Owning Bitcoin is to be in a partially completed transaction.  Until it is exchanged for a tangible good in another trade, the owner of the Bitcoin is in the position of having given up something tangible for nothing in return.

I made the point, in a previous video that redemption is not the same thing as purchasing the monetary commodity.  Prior to 1933, one could go to any branch bank of the Federal Reserve and exchange dollars for gold.  This was not “buying” gold, but redeeming the dollars.  One accepted the dollar bill in trade, with the sure and certain knowledge of the terms (e.g. gold value) of redemption.  Unlike then, today the dollar can be used to buy gold.  But there is no way to know the terms—or indeed if one can even make the purchase at all—until one attempts the transaction.

It is the same with Bitcoin.

Now that I have used Bitcoin as the foil to establish several points, let’s look at the dollar and its ability to buy gold.  Consider the following points that I discussed at greater length in this video:

  1. irredeemable debt-based currency provides no way to extinguish a debt
  2. the dollar itself is a debt instrument
  3. payment in dollars merely transfers the debt
  4. all debt is borrowed at interest
  5. eventually, the interest cannot be paid out of income
  6. the only way to pay the interest in aggregate is further borrowing
  7. total debt in the system grows exponentially until it cannot

The system is designed to drive all participants to bankruptcy!  “This is,” as they say in technology industries, “a feature, not a bug”.

In this light, the problem is not the rising quantity of dollars per se (though endless issuance by the Fed is certainly not good) but its falling quality.  It is all headed to default when the debtors cannot borrow any more.  This point was reached in Greece, but it is years away in the United States.

One might be tempted to ask why the banks and financial institutions don’t recognize this and refuse to do business in dollars.  The answer is that they are regulated, they ultimately answer to investors who believe in dollars, and they are given perverse incentives to continue to play the game.  For example, they can borrow short at near zero from the Fed, and lend long at near 2% to the Treasury.  This transaction creates no wealth, but the banks engaging in it earn “profits”.  They are fat, dumb, and happy to make this spread and many others like it.

So who understands it?  The lowly gold hoarder does.  His challenge is that he is sometimes distracted by the mainstream message that gold is a risky commodity that cannot be used to buy bread.  He is often distracted by the goldbug message that the rising gold price is a “profit” (and the falling price is a conspiracy).  If he can see through these two mirages, then he can see that all the credit in the system must inevitably and inexorably crash to earth like too many rocks impossibly kept aloft for a while by a juggler who exceeds his limited skill.

“Money is gold and nothing else,” as JP Morgan famously said in testimony before Congress.  When bad credit eventually is repudiated, gold will still endure.

This is the context to my argument: permanent gold backwardation is a late symptom of the terminal monetary disease.  Like jaundice in a cancer patient, signaling to the doctor that the patient is in immediate risk of death by liver failure, permanent backwardation signals to the economist that the monetary system is in immediate risk of death by gold withdrawal.

The dollar is not strictly redeemable, but it can still be used to buy gold.  This provides an “escape valve”.  Those who wish to convert their irredeemable paper into the monetary commodity, to complete the transaction of trading their product for dollars and dollars for the monetary commodity, can still do so.

Backwardation is when the price of a commodity in the futures market is lower than the price in the spot market.  Anyone who has the commodity can make a profit by simultaneously selling the commodity in the spot market and buying a future to recover his position.  This trade has no price risk, credit risk, or even spread risk.  The only risk is default.  Permanent backwardation is when all futures contracts fall below the spot price, and the gap keeps widening no matter how much the price rises.

The existence of now-chronic temporary backwardation, is proof that gold owners are starting to become reluctant to trust the dollar system, and the lure of profit is insufficient.  If they do not trust the delivery of a future, then they have to question if they will be able to buy gold on any terms.  In an environment of collapsing credit and bankruptcies, this lack of trust will be quite well founded.

The final stage is brought on by the complete withdrawal of offers to sell gold for dollars (i.e. the gold bid on the dollar).  Collapse will come swiftly because of asymmetry.  While no gold holder will then want dollars, some dollar holders will desperately want gold.  They will buy any goods that have a gold bid.  The trade of dollarsàcommoditiesàgold will drive the prices of commodities up to any arbitrary level in dollar terms, and down nearly to zero in gold terms.  Oil could become $1,000,000 per barrel and 0.0001 gold grams per barrel at the same time.  This process will continue until sellers of commodities will no longer accept dollars.

The dollar is fiat, which means imposed by force.  It is debt-based, which means its value derives from the efforts of the debtors to continue to pay.  And it is irredeemable which means there is no way for debtors, in aggregate, to get out of debt, and no way for creditors to know the terms by which they can get gold.  The government uses force to impose the contradiction of a debt-based currency that cannot extinguish debt.  People would not accept it otherwise!

The final resolution of such a contradiction is total collapse.



For those interested in tracking the backwardation occurring in both gold and silver right now, Monetary Metals publishes The Last Contango Gold Basis Report (free registration required).

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TX-Mike's picture

Please foregive my ignorance, but I have a question or three...

Does anyone really know what the computations are that the "bitcoin miners" work on so feverishly?

If we assume the belief that brute-force breaking of many popular cryptographic techniques require a MASSIVE amount of computing cycles, what better way to get people to spend their own money to deploy unimaginable amounts of CPU power, all working together, but apart, to crack codes.  

What more brilliant way to get the general public to help the NSA, CIA, and others crack coded messages than to give the HOPE of receiving some fake money that "can't be tracked"....

It's brilliant..!  People who want to be anonymous (and are thereby suspect) go out, spend money, and then make that CPU available for cryptographic calculations that they aren't likely to understand or track..

Yeah, no thanks..

When everything goes dark, I won't miss the computers (or my bitcoins)!

The Abstraction of Justice's picture

'Other than the value you hope it has in trade, it has no utility by itself'

Exactly the same can be said of gold. It is valuable because it is perceived as valuable. It's value is what you can exchange for it, you can't eat it, drink it, or build (good) bridges from it. As long as the cryptography and network issues are perceived as providing a medium of exchange bitcoin can be every bit as shiny and sexy as gold.


If you want something concrete to invest in, try silver, has perceived money value and true industrial use, value in itself.

BigJim's picture

Actually, gold does have 'practical' uses. But you're right, they're very much secondary in terms of constituting demand for the metal.

But this debate just begs the question.... why is it that wanting to use something as money is not a valid 'use', but wanting to use it for (say) building bridges, is?

Agent 440's picture

When the government moves on bitcoin, then you'll know it's worth something.

ebworthen's picture

I distrust Bitcoin precisely because of the messianic fervor of it's supporters.

zjxn06's picture

What happens to a "Bitcoin" when the power goes out?

The Abstraction of Justice's picture

Nothing, as the bitcoins are stored in a wallet file that persists on your hard drive. If you are paranoid about losing the file, back it up. Can you back up paper currency without breaking the law?

zjxn06's picture

What happens to a "Bitcoin" when the power goes out?

The Abstraction of Justice's picture

Nothing, as the bitcoins are stored in a wallet file that persists on your hard drive. If you are paranoid about losing the file, back it up. Can you back up paper currency without breaking the law?

BigJim's picture

Judge: You come before the bench accused of the grievous crime of counterfeiting!

Counterfeiter: No, my Lord, honest, I swear, I was just making a backup!

dark pools of soros's picture

when the old dino's here finally buy bitcoins we can dump them...and move to something else


atleast that is what their fear is no doubt

Lordflin's picture

One ounce of gold is worth one ounce of gold... One ounce of bitcoin is worth... Ah, well... There is no such thing...

The Abstraction of Justice's picture

You can encode every bitcoin that has been mined or can be mined in a few milligrams of hard disc surface.

jtlien's picture

Bitcoin facilitates the exchange of discounted real bills and has the character or a real money in that it takes some amount of work (energy expended and computer time) to generate.   Already Western Union and others are talking of creating competing forms.   I see it more as a method of facilitating exchange of goods than a store of value.  It is dependant on the maintainance of institutions like an open uncensored internet etc.  something that gold or silver do not require.   It's like a hard to manufacture fiat currency divorced from state sponsorship, but the current volatility in its value is scary.  As it matures, futures markets may smooth out the volatility enough so that you can exchange dollars for it on Tuesday and not see 30% fall in value by Wednesday.



Lordflin's picture

Well this will really irk the bitcoin folks... Not intentionally, just making a point...

It takes effort to dig a hole and fill it in... So you dig 100 holes in a day and fill them, and I pay you one bitcoin for your effort... Like for like...

Difference between those who store virtual wealth from those who stack... The former need the rest of us to believe in order to have value... perceived value anyway... The latter group recommend metals as they do not want to see their fellow man robbed of his hard earned wealth. Gold and silver do not require faith... they are what they are...

the grateful unemployed's picture

do you know how this works? they must be in the foreign currency market every day? what if they get caught in a value change, are they hedged?.

irishlink's picture

I have tried to follow every post on bitcoin since I first heard it mentioned on ZH. after weeks of reading I still do not know who is the brain behind Bitcoin. This is really starting to worry me as I feel it is all Fed inspired and are TPTB flying e kite to replace the dollar when the whole ponzi comes crashing down. 

kindape's picture

"I have tried to follow every post on bitcoin since I first heard it mentioned on ZH. after weeks of reading I still do not know who is the brain behind Bitcoin."


You might try Wikipedia instead of ZH, from time to time

The person behind it is Satoshi Nakamoto

virgule's picture

"The person behind it is Satoshi Nakamoto".

It's true that someone under the alias "Satoshi Nakamoto" was strongly involved in starting bitcoin as a concept and developing its methods...but it's also very misleading for ZH readers, who might think there is "1 guy behind Bitcoin".

Bitcoin is similar in some ways to Linux: open-source, doesn't belong to anyone and doesn't have any physical person behind it (ie Bitcoin does not depend on the willingness of one person to continue to make Bitcoin available or to operate).

Instead it's concept/technology/software algorithm that is publicly available, shared & developped by hundreds of cryptographers/cryptanalysts/programers, and used by whoever feels like playing with it. It only exists because enough people feel like using it and developing software for it. So long as there is interest in it, Bitcoin can in theory continue to live. Satoshi is no longer involved in the Bitcoin movement, or at least not under that pseudonym.

PS: There is no "Linus Torvald" in Bitcoin, because the software can't be owned or diverted for "evil/private/other" uses (many parties have attempted to capture Linux to restrict it's freedom), because Bitcoin uses P2P technology to share everything about Bitcoin among all it's users. Just like a shared song on a P2P network doesn't belong to one single person, Bitcoin as a whole doesn't and cannot belong to a single person, by design.

This doesn't mean evil people cannot fatally screw up Bitcoin if they try hard enough...

BigJim's picture

I'm sorry if this is a stupid question - but what makes the bitcoin system/universe unique, or more to the point, a monopoly? Bitcoin is (I believe) based on 64-bit numbers... what's stopping someone coming out with BTC128? And what is stopping another group of people coming out with (say) iCoin, a competing digital currency? Or eCoin?

I just don't get it. When I buy gold/silver/platinum, I am buying a certain amount of an element. Unless a great deal more of it is suddenly found, I know there is a limit to how much of it exists, and, more to the point, some idea of what it is competing against. What's stopping there being 10, new, competing digital currencies? A 100? 10,000?

The Abstraction of Justice's picture

Does it matter. If thousands have cryptographers and security experts have looked over the code, then any fault would have reared its head already.

the grateful unemployed's picture

yes, just like the Trillion Dollar coin, its a trial balloon. however there is a solution to the dollar as debt, other than bankruptcy, and that is to raise the cost of using and owning money,

Seigniorage derived from specie—metal coins—is a tax, added to the total price of a coin (metal content and production costs), that a customer of the mint had to pay to the mint, and that was sent to the sovereign of the political area.[1]seignory

right now its Goldman and HFT (and maybe we can make the case GS, HFT and the FED are all the same thing)  which is collecting a tax on money. Now that the Fed prints money, this tax no longer reverts directly to the UST, or the taxpayer.. the Feds balance sheet is filled with all sorts of "public" debt paper, like MBS, so its okay. The Fed is also a GSE, which means their debt is our debt, but as the private printer of money they collect the tax, we assume the debt... BAD DEAL. 

one other far out Fed solution (they have meetings to discuss these things) is to put a time date in every bill. use it or lose it. they can also push rates negative, so the bond buyer pays more for the bond than the interest he gains. they can do the same thing with bank accounts, where they confiscate inactive accounts (they define the expiration date on the money, but its really government which confiscates the money, or taxes the user)

q99x2's picture

"You cannot hold it or stack it in a safe in the floor"

Wrong. You certainly can use BitCoins on holograms and place them on coins or any thing you wish to stack and place in a vault. So in addition to being virtual BitCoin can be tangible. Bitcoin cannot be strictly physical. And more and more you can trade goods and services (especially tech) for BitCoins.

Yancey Ward's picture

His challenge is that he is sometimes distracted by the mainstream message that gold is a risky commodity that cannot be used to buy bread.  He is often distracted by the goldbug message that the rising gold price is a “profit” (and the falling price is a conspiracy).  If he can see through these two mirages, then he can see that all the credit in the system must inevitably and inexorably crash to earth like too many rocks impossibly kept aloft for a while by a juggler who exceeds his limited skill.

This was the most important part of this essay.

adr's picture

Bitcoin man: High yes, I have 100 BTC and would like to buy that car there.

Car Dealer: Oh, I'm sorry, we converted to Litecoin yesterday. We like their client software better.

Bitcoin man: But my Bitcoins are worth way more in dollar terms than Litecoin. Litecoin is only worth like $1 per coin, Bitcoin is worth over $100.

Car Dealer: Do you have $10,000?

Bitcoin man: No, I traded them for Bitcoin.

Car Dealer: Either bring me $10k in dollars or 9k Litecoins, then you can have the car. You'll save $1000 if you transfer Litecoins. (Thinking to himself, ha when that guy buys 9k Litecoins the value is going to explode making my Litecoin stash soar in value).

So Bitcoin just failed because a vendor would not accept it as a means of trade for his goods. Bitcoin is not money because it has no universally accepted value as a unit of trade. Yes, there are people that will accept Bitcoin as payment, but that value has not been agreed to by the whole.

dark pools of soros's picture

because 'a vendor'... even if there was one like that, the free market would say otherwise right?  isn't that what ZH fans love? a free market?  you all don't know one if it smacks you in the gut


keep trynig to convince yourself


goldenboy's picture

Brilliant new post at "Sympathy for The Man; He Needs Some Fun, too" . Outlining how you'd have to be a complete sucker (a bit like a Bitcoiner) to think that you can escape The Man's means and measures to tax every penny which comes your way. Think you've freed yourselves? Think again! Think harder....

dark pools of soros's picture

you are a douche...  ever heard of timebanks?  they aren't taxed either


you all are lazy slaves chaining yourselves even if someone unlocks your bonds

jomama's picture

such vitriolic comments from one who claims to be 'freeing the slaves'.

One World Mafia's picture

BC is proving to be a little too convenient in taking the pressure off the physical gold/silver market. In the same vein if govt wants to kill BC they can start another digital currency that works exactly like BC but is a bargain and then start to drive the price up. Faith in BC is shaken as realization takes hold that BC is very dilutable.

dark pools of soros's picture

wow ..  so what is a bargain?  bitcoin price is set by the free market, so you are saying that you want capital controls to force merchants to give more value to a centrally controlled digital currency instead?  


and you come to ZH why?



little buddy buys the dips's picture

i wouldn't touch a bitcoin with a ten-foot bitfork. 


no matter how much lipstick you put on this pig, it is still a pig.



Uncle Remus's picture

There is no spoon.

MGA_1's picture

To me the only problem with bitcoin is "can it be hacked".  So far, no problems.  I'd say, just let the market figure it out.

paint it red call it hell's picture

How does the joke go? The psychotic steps out an upper floor window thinking he can fly and after passing a few floors on the way down says, "So far, so good".

ejmoosa's picture

I agree.  Let the markets test and figure out the strengths and weaknesses.  


Just don't force me to use it if I choose not to.

TwoHoot's picture

After a lot of study and some very small token transactions to get a feel for the mechanics of bitcoin, I have concluded it is a very useful medium for transferring money from one jurisdiction to another and very little else. Therefore, I think its value is dependent on the aggregate need to quickly move money from one country to another outside the banking system.

I would not consider it a storehouse of wealth or an efficient method of settling accounts on a day to day basis. Widespread use for either traditional money function would probably overload the bitcoin system.

Just my opinion and for what it is worth.

greggh99's picture

"Widespread use for either traditional money function would probably overload the bitcoin system."

Very timely comment. MtGox, which handles 80% of the BC market, has been up and down all day with database errors.

dark pools of soros's picture

mt gox doesnt run bitcoin..  it can fail all it wants

jeebus's picture

Worried that your industry is becoming irrelevant? 

paint it red call it hell's picture

Until a stack of Bitcoin under gravitational force can mash my toe, to me, Bitcoin is a speculative video game. Possibly as some claim a digital ponzi play; as yet to be seen. We have an entire generation or two of gamers, of online myth courting romancers, ether card sharks, and cyber role players that have drank the hexadecimal cool-aid until it now seeps from their Bitcoin wallets.

Quoting the Buddha, "This to shall pass". I think it shall, because gamers too play to win.

d edwards's picture

"An internet-based currency" reminds me of the internet-based " businesses" that proliferated leading up to the NASDAQ crash 2000.

Deja vu?

Transformer's picture

And, on the otherhand, today we have thousands and thousands of on line businesses.  It allows very small, specialized businesses to proliferate and prosper.

Diogenes's picture

Bitcoin is a fiat currency just like US dollars and every other currency. Any of them is perfectly functional as money or a money substitute until it gets debased or inflated. Here is where Bitcoin shines, it is designed as a currency that will get more scarce in the future not less, and therefore will increase in value not decrease. This is already happening.

orez65's picture

"... it is designed as a currency that will get more scarce in the future not less ..."
Just like the US dollar at $20 per oz of gold, until they changed it to $35 per oz of gold and until they changed it to ... well, to ... infinity.
Same will happen to Bitcoin because it is another fiat money scam, a Ponzi scheme.
Don't you people ever learn?!

Swarmee's picture

Bitcoin doesn't have an army backing it, bitcoin is not used in global commodity trade, and bitcoin denominates no inter- nor intra-government transactions. In these ways it is NOT like all other fiat currencies and if you can't understand that those differences represent risk then you're not paying attention to how the world works.

Diogenes's picture

There are lots of currencies that have no army behind them and are not used in global commodity trade. Actually Bitcoin has an army of geeks and is used in international trade. As far as government transactions go, you have me there.

I find it amusing that you think value depends on government fiat.

Swarmee's picture

An army of geeks is not a real army. And it's an open source project, which I have worked on in the past, that army is fickle and will move to the next favorite fork faster than you can type /Dev/null. And no, it is not used international trade in a significant way. How many bushels of corn traded for BTC since January? How many shipping barges settled waybills in BTC? How many barrels of oil have been exchanged for BTC? You can't pretend your small scale experiment equals those markets because someone bought some web service work with BTC, the scale of the comparison is not accurate.

And please, by all means directly quote where I said value depends on government fiat? Oh that's right I didn't, you have to rely on a strawmen argument to address my points? Listen, what matters is that the players with the momentum here are the governments, and history has show time and again that they have the resources, the motive, and the willingness to protect their interests which includes their currencies. BTC is still a little sandbox compared to the established players. Which means it is vulnerable on a number of fronts, not the least of which is ignorance on the part of its proponents; some of it naivety, some of it willful. What I'm pointing out is this current run up is so fast so soon with so many unknowns that it is not sustainable. BTC has a lot more adoption needed, and lots of work on UI, education, and accessibility before it can sustain beng an alternative to a full-fledged currency. The exuberance of early adopters looking at 1000% paper gains (paper gain until you have it in tangible form be that global fiat, PMs, or goods - your choice) looks and feels exactly like any penny stock forum. Advocates shrug off valid questions and ignore anything inconvenient brought up. I've seen this mentality. Been there myself, it won't last. BTC has long term potential but this run-up seems premature. I am also suspicious of anything touted as a "store of value" with this kind of volatility. It was not sustainable for silver in 2011 and silver has tangible uses in industry, jewelry, and historical use as money. Good luck!

Help Is Not Coming's picture

I made the point, in a previous video that redemption is not the same thing as purchasing the monetary commodity.  Prior to 1933, one could go to any branch bank of the Federal Reserve and exchange dollars for gold.

True, redemption is not the same as buying gold. However, since the Federal Reserve is a private cartel of banks the government cannot force me to accept their debt. The government cannot induce anyone into any private transaction. They are forced to keep a remedy for this situation and it exists in the form of 12 USC 411.

True, we can no longer go to the bank and redeem US dollars for gold but you can redeem them for virtual United States Notes. The difference between United States Notes and Federal Reserve Notes is that Federal Reserve Notes are an elastic currency (meaning banks can fractional reserve lend against those deposts) and United States Notes are not elastic and are fixed at an amount of $300M.

So, you want to "Fight the Fed" but not leave your arm chair? Simply put a restricted endorsement on the back of the checks you deposit in the bank. You restrict the endorsement on the back of a check when you write "For Deposit Only". Just add to that with the following verbage: "Redeemed for Lawful Money pursuant to 12 USC 411". The bank is legally obiligated via 12 USC 411 to redeem your Federal Reserve Notes for United States Notes even if they exist only in 1's and 0's.

By doing so you've just deposited money in the bank that they can't fractionally reserve bank against. When you endorse the back of a check you endorse the Federal Reserve's credit.

If you hate the Federal Reserve just quit endorsing their credit. If you get enough people doing this and you could have a major impact.